Dividend Tax Withholding Per Country: The Differences in Rates and Rules

Dividend Tax Withholding Per Country: The Differences in Rates and Rules

Most countries levy a withholding tax on the payment of dividends. Countries are free to determine whether or not to levy dividend withholding tax, and which rates to apply. Rates vary from 5% to 35%, or more. Dividend withholding tax is levied over the gross amount of the distribution. This means that expenses related to holding the shares or collecting the dividend income are not taken into account.

As the receipt of dividends is generally also taxed in the country of residence of the investor, there is a risk of double taxation (once in the country where the dividend originates and then again in the country where the dividend is received). Bilateral tax treaties seek to reduce (the risk of) double taxation.

Many countries have concluded bilateral tax treaties (also known as double tax treaties) under which they voluntarily and reciprocally reduce the rates that normally apply under their domestic tax laws. The reduction of withholding tax stimulates cross border investment between the countries involved as it reduces (double) taxation on investment income and consequently the cost of investment.

The most common tax treaty rate for “ordinary treaty residents” on dividends is 15%, which is lower than the domestic withholding tax rate of most countries. Ordinary treaty residents do not meet any conditions other than being treaty residents and beneficial owner of the income received. Being a treaty resident effectively means they are fully liable to tax in their country of residence. Being a beneficial owner means receiving the income for your own account (i.e. not receiving it for another person as their agent, nominee or conduit).

Sometimes and subject to certain conditions, dividend withholding tax may be reduced further or even eliminated entirely, either by exemption at source (no withholding tax is withheld in the first place) or by refund (withholding tax is withheld but subsequently refunded upon request).

Click on the links below to learn more about:

Dividend withholding tax in the United States

Dividend withholding tax in Germany

Dividend withholding tax in the United Kingdom

Dividend withholding tax in Canada

Dividend withholding tax in France

Dividend withholding tax in Australia

Dividend withholding tax in Switzerland

Dividend withholding tax in the Netherlands

Dividend withholding tax in Ireland

Dividend withholding tax in Spain

Dividend withholding tax in Luxembourg

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